EM euro issuance will be highest in a decade on QE

LONDON, Feb 24 (IFR) - Euro-denominated emerging market
sovereign issuance will soar to its highest levels in 10 years
on the back of the European Central Bank's quantitative easing
programme, as issuers outside the eurozone seek to take
advantage of falling euro yields, according to bank analysts.

Euro debt issuance from emerging market sovereigns is
expected to rise by 67% to EUR35bn this year because of the
ECB's EUR1.1trn bond buying plan, which has already pushed
yields down in the single currency region before a security has
even been bought.

The ECB move will have a knock-on effect on euro-denominated
issuance outside the eurozone, as investors look outside their
regular stomping ground in search of higher returns, driving
down the yields of emerging market euro curves in the process.

There is evidence that ECB fever has already hit the market
following a tightly-priced dual-tranche offering from Mexico on
Thursday.

The sovereign printed two euro bonds, due in 2024 and 2045,
inside its dollar curve on a headline basis, though on a
post-swap basis issuing in dollars would have been more cost
effective. Still, the deal allows Mexico to consolidate its euro
investor base.

SAME SIZE, MORE EUROS

Euro issuance from emerging market sovereigns in 2014
reached around EUR21bn, or about 27% of a sovereign market that
totalled roughly USD100bn-equivalent last year, according to
Societe Generale.

"I would expect the size of the market to remain roughly the
same at around USD100bn sovereign issuance this year," Régis
Chatellier, director, EM sovereign credit strategy at Societe
Generale told IFR. "But the share of euro sovereign bonds should
increase to 40%, which means the share of US dollar bonds should
be lower."
Continuación...